A Living Wage for Young People: Lessons from the UK and the US

By Lina Klesper LL.M, International Legal Assistant PKF Malta

In the Autumn 2024 budget, the UK government announced increases to both the National Living Wage and the National Minimum Wage, once again bringing the issue of fair wages into focus. The autumn budget includes a specific raise in the National Minimum Wage for young adults, prompting questions about pay structures for a group often overlooked in wage policy discussions. While workers in the UK benefit from relatively robust wage protections, young workers in the US face greater challenges under an outdated minimum wage system that particularly disadvantages them.  As young workers in both countries struggle with rising costs, stagnant wages, and inflation, recent economic data underscore their financial vulnerability, making the conversation around fair and sustainable wages more pressing than ever.

The minimum wage is a legally mandated baseline that employers must pay their employees, while a living wage reflects the income necessary to cover essential costs, like housing, food, healthcare, and transportation. Unlike the minimum wage, the living wage is designed to account for regional variations in the cost of living, making it a more effective measure of what it takes to achieve financial security. In April 2024, the International Labour Organization (ILO) endorsed a formal definition of a living wage, defining it as the “remuneration received for a standard workweek by a worker in a particular place sufficient to afford a decent standard of living for the worker and her or his family”.  This endorsement highlights the potential impact of a living wage on both economic productivity and income equality, with the ILO estimating that a global living wage could inject $4.6 trillion into the world economy annually.

With the cost of living escalating faster than wage growth in both the UK and the US, young workers are particularly vulnerable to economic instability. In the UK, individuals aged 16-24 make up a substantial portion of the workforce in traditionally lower-paid sectors, amplifying the call for fairer wages. The US, meanwhile, has maintained a federal minimum wage of $7.25 since 2009, despite the fact that the purchasing power of this wage has eroded significantly over the past decade and a half. The UK has gradually increased its minimum wage, setting the revised National Living Wage from April 2025 at £12.21 per hour for those over 21, yet young workers will still face a tiered wage system with reduced rates for younger age groups: £10.00 National Minimum Wage for 18-20-year-olds and £7.55 for those under 18. These figures fall below the minimum income necessary for a decent living in many parts of the UK, where the Living Wage Foundation’s benchmark sits at £13.85 per hour in London and £12.60 across the UK.

While the Autumn 2024 budget introduced an increase in the minimum wage for young workers, marking a step forward, it still falls short of the Living Wage Foundation’s recommendations. Many young people work in sectors where low wages are pervasive, like retail, hospitality, and food service, and without adjustments to address cost-of-living disparities and market volatility, they continue to face financial insecurity. This increase, while promising, does not do enough to bridge the gap between minimum and living wage rates, especially as inflation and housing costs outpace income growth.  For young adults striving for financial independence, these limitations compound the challenges of building a secure financial future.

Across the Atlantic, young workers in the US confront similar if not amplified challenges. A stagnant minimum wage of $7.25 has not kept pace with the cost of essentials, forcing young Americans to rely on multiple jobs or public assistance to meet their needs. MIT’s Living Wage Calculator places the national living wage at $27 per hour — more than triple the minimum wage. One particularly criticized policy is the “youth minimum wage,” which permits employers to pay workers under 20 as little as $4.25 per hour for their first 90 days of employment. Although intended to provide youth employment opportunities, this wage disparity often reinforces financial precarity, limiting young people’s economic mobility and reducing their purchasing power. The Economic Policy Institute contends that age-based subminimum wages disadvantage young people, undercutting their financial stability and fuelling wage inequality.

In contrast, certain UK employers have championed the living wage, demonstrating its economic and social advantages. The Living Wage Foundation’s accreditation program, embraced by more than 14,000 companies, has encouraged firms to offer fair wages, benefiting over 200,000 workers, including young people.  Businesses that have committed to the living wage report higher employee satisfaction, lower turnover rates, and enhanced productivity, indicating that the benefits extend beyond the individual to the company and the broader economy.  IKEA UK, one such company, reported improved staff morale, greater retention, and better customer satisfaction after adopting the living wage. These cases underscore how living wage policies can mitigate the financial strain facing young workers while delivering value to employers.

Implementing a living wage policy across the UK and US could have far-reaching economic benefits, especially for young workers. The World Economic Forum predicts that a global living wage would contribute trillions to global GDP, driven by heightened productivity and increased consumer spending. In the UK, the Centre for Labour and Social Studies found that aligning the minimum wage with the living wage standard could reduce government spending on social benefits by enabling workers to attain financial independence.  The additional disposable income provided by a living wage would bolster local economies, particularly in service industries, creating a ripple effect of increased demand and economic growth. Young adults, especially, would benefit from greater economic stability, allowing them to invest in education, healthcare, and housing, which can lead to better long-term financial outcomes.

Both the UK and the US, alongside other EU countries, have opportunities to reform wage policies to better reflect the realities of the cost of living. A living wage is more than a financial figure — it represents a commitment to economic justice, productivity, and social well-being.  As the costs of living continue to rise, supporting young workers through equitable wage structures will not only empower individuals but will strengthen entire communities.